Selling a house, flat, or land in Kerala as an NRI is not just a property transaction â it is also a tax event. The buyer must deduct tax at source, and the rate depends on whether your gain is short-term or long-term, plus surcharge and cess.
For NRI property sales, TDS is generally deducted under Section 195. Long-term gains are taxed at 12.5% and short-term gains at slab rates, plus surcharge and cess. The buyer usually needs TAN, but Budget 2026 proposed a PAN-based simplification from 1 October 2026.
TDS Basics for NRI Property Sales
When a resident buyer purchases property from an NRI seller, the buyer must deduct TDS from the sale consideration before paying the seller. This is different from the 1% TDS used for resident-to-resident property deals.
| Situation | Section | Basic Rate | Return Form |
|---|---|---|---|
| Resident seller | 194-IA | 1% | 26QB |
| NRI seller | 195 | Depends on capital gains type | 27Q |
Which Rate Applies?
| Gain Type | Holding Period | TDS / Tax Rate |
|---|---|---|
| STCG | 24 months or less | Slab rate, up to 30% + surcharge + cess |
| LTCG | More than 24 months | 12.5% + surcharge + cess |
The buyer often deducts tax on the total sale amount unless a lower or nil deduction certificate is issued. That is why many NRI sellers end up paying more TDS upfront than their actual tax liability.
How to Reduce Excess TDS
You can apply for a lower or nil TDS certificate using Form 13 if your real capital gains tax will be lower than the default deduction.
This is especially important if you qualify for exemptions under Sections 54, 54EC, or 54F, or if your purchase price and indexed cost make your gain smaller than the sale value suggests.
Buyer Compliance
- Get TAN or use new PAN-based process. Under current rules, the buyer usually needs TAN for NRI property TDS. Budget 2026 proposes PAN-based challans from 1 October 2026.
- Decide the rate. Check whether the sale is short-term or long-term.
- Deduct TDS on time. Pay the amount before remitting the balance to the NRI seller.
- File the return. For NRI sellers, buyers generally use Form 27Q and issue Form 16A.
What NRI Sellers Should Do
- Ask for a proper capital gains calculation before signing.
- Check whether Section 54 or 54F exemption applies.
- Apply for lower TDS if needed.
- Keep copies of Form 16A and sale documents for ITR filing.
- File your Indian return to claim any refund if excess TDS was deducted.
Budget 2026 simplified the process, but it did not change the actual TDS rates on NRI property sales.